The AGL Energy Limited (ASX: AGL) share price has been in the red over the past month, losing around 16% of its value.
The gas and electricity company's slump has been a major weight on the S&P/ASX 200 Utilities Index (ASX: XUJ). It's the market's worst performing sector by a significant margin in the past month, down 8.7%. The second worst performer, the S&P/ASX 200 Real Estate Index (ASX: XRE), is 4.52% lower.
Certainly, other utility companies are also down over the period. These include Origin Energy Ltd (ASX: ORG), down 2%, and Meridian Energy Ltd (ASX: MEZ) which has lost about 2.8%.
Let's check what may be impacting the AGL share price lately.
What's happening with AGL's energy transition?
The unfolding global energy crisis is undoubtedly hitting the utilities sector hard.
It comes as AGL is facing its own challenges. These include recovering from a $225 million loss for FY22, replacing heads of management, finding a new CEO and board chair, and transitioning away from carbon-based energy production methods.
As reported by The Australian, one of AGL's key focuses is likely to be on transitioning from coal to more sustainable energy sources.
This observation was made by VanEck portfolio manager Jamie Hannah. VanEck is a top 10 shareholder of AGL.
Hannah said:
They need to work out what their long-term plan is, in terms of what they're going to be doing with their coal power plants, if they're going to keep them, how long for and then how they'll be increasing their renewables production.
He continued:
I think financing is part of the issue here. Coal power plants are generating returns and they probably want to keep them for as long as possible but a lot of investors want to see a move to renewables.
Certainly, the move to renewables could come at an opportune time for AGL, with advances in hydrogen and nuclear fusion developing rapidly.
Alternative energy sources abound
AGL launched a study into the feasibility of using hydrogen energy in June this year. Part of the study is the prospect of converting its gas-fed power station at Torrens Island, northwest of Adelaide, to hydrogen power. It also investigates the feasibility of creating a green hydrogen hub near Adelaide.
Meanwhile, nuclear power is undergoing a renaissance in popularity, thanks to developments in nuclear fusion technology and miniaturised nuclear reactors. Several countries, including France and India, have indicated they will join the nuclear ranks. While others, such as Japan and the United States, are expanding their nuclear presence.
Although nuclear power has been banned in Australia since 1998, indications in recent times have shown some sections of the federal government are not averse to the idea. As shadow defence minister in April 2022, Labor's Brendon O'Connor called for Australia's nuclear submarines to be built locally as part of the AUKUS defence deal, as reported by the ABC.
Indeed, Australia already has a nuclear reactor on its soil. The Open Pool Australian Lightwater (OPAL) has been operating at Port Kembla, New South Wales since 2007. OPAL is powered through enriched uranium for scientific uses.
Whatever green option AGL opts for may be controversial, but these developments show the landscape of energy production is rapidly evolving.
AGL share price snapshot
AGL shares are currently trading for $7.12 apiece, up 2.3% on the day so far, clawing back some ground after their steep fall over the past four weeks.
Even with the losses of the past month, the AGL share price is up 16% year to date and 16.53% over the past year. This compares to the S&P/ASX 200 Index (ASX: XJO)'s 6.44% loss in 2022 so far. The benchmark index is also down around 6% in the past 12 months.
AGL's current market capitalisation is around $4.8 billion.
